RIGHT TO PAID ANNUAL LEAVE

Anyone with deemed ‘worker’ status must be able to carry over annual leave. The case of King v The Sash Window Workshop Ltd is another important holiday pay case and has significant implications for employers.

Facts

Mr King worked for the Sash Window Workshop Ltd (SWW) as a commission only salesman for 13 years. He received no salary and was never paid for any holidays or periods of sickness absence. After nine years, SWW offered him an employment contract under which he was entitled to paid annual leave, but he elected to remain self-employed. SWW terminated his contract when he turned 65 and he lodged a claim for age discrimination and unpaid holiday.

Mr King argued that he had not taken his full annual leave entitlement each year because it would have been unpaid.

The tribunal found that he was a “worker” for the purposes of the Working Time Regulations and therefore entitled to annual leave with pay throughout the 13 years he worked for SWW.

SWW appealed. The Employment Appeal Tribunal found there was no evidence of Mr King giving any notice of his intention to take holiday and therefore there was no entitlement to be paid for untaken leave.

Mr King appealed to the Court of Appeal, at which point it was referred to the European Court of Justice.

Decision

The ECJ held that workers must be provided with adequate facilities for workers to take paid annual leave. If a worker has not taken some or all of their annual leave entitlement because their employer refuses to pay them for it, the worker has effectively been prevented from exercising their right to paid leave.

Ignorance of Mr King’s employment status was no defence to SWW. The ECJ said that it was up to employers to get it right and if they wrongly classified a worker as self-employed, the employer should bear the consequences.

The ECJ also noted that the case was different to the situation where a worker is prevented from taking holiday due to sickness. Case law has held that national laws can impose limits on the period of carry over in sickness cases, as in those cases the court had to balance the protection of the worker against the organisational difficulties that employers may face as a result of holiday accrued during sickness absence. In this case, there was no need to protect the employer’s interests.

The ECJ held that where a worker has not exercised their right to paid annual leave over several years because their employer wrongly failed to provide holiday pay, the Working Time Directive requires the worker be allowed to carry their holiday rights until the termination of employment. Imposing a time limit would extinguish the worker’s right to untaken holiday would amount to validating the employer’s unlawful conduct.

In respect of whether SWW’s employment offer in 2008 amounted to an “adequate facility” for exercising Mr King’s rights, the ECJ left this as a matter for the UK courts to decide.

Comment

This decision only applies to the 20 days leave under the Working Time Directive, rather than the additional eight days. Nevertheless, employers who have misclassified contractors as self-employed, rather than workers, could be faced with significant liability for unpaid holiday going back a number of years. Under UK legislation there is a two-year backstop on claims, however this has no relevance in circumstances where employers have not provided an adequate facility for workers to take holiday, as following this decision, pay in lieu arises all at once on the termination of contract.

Whether there will be challenges to the Employment Appeal Tribunal’s decision in Bear Scotland v Fulton, which held that tribunals cannot award back-pay for holiday leave beyond any three-month break, remains to be seen.

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